Your Daily Schadenfreude

Elizabeth Holmes, CEO of Theranos has just had her personal wealth recomputed by Fortune. Yesterday,   it was $4,500,000,000.00 today it is $0.00:

Last year, Elizabeth Holmes topped the FORBES list of America’s Richest Self-Made Women with a net worth of $4.5 billion. Today, FORBES is lowering our estimate of her net worth to nothing. Theranos had no comment.

Our estimate of Holmes’ wealth is based entirely on her 50% stake in Theranos, the blood-testing company she founded in 2003 with plans of revolutionizing the diagnostic test market. Theranos shares are not traded on any stock market; private investors purchased stakes in 2014 at a price that implied a $9 billion valuation for the company.

Since then, Theranos has been hit with allegations that its tests are inaccurate and is being investigated by an alphabet soup of federal agencies. That, plus new information indicating Theranos’ annual revenues are less than $100 million, has led FORBES to come up with a new, lower estimate of Theranos’ value.

FORBES spoke to a dozen venture capitalists, analysts and industry experts and concluded that a more realistic value for Theranos is $800 million, rather than $9 billion. That gives the company credit for its intellectual property and the $724 million that it has raised, according to VC Experts, a venture capital research firm. It also represents a generous multiple of the company’s sales, which FORBES learned about from a person familiar with Theranos’ finances.

At such a low valuation, Holmes’ stake is essentially worth nothing. Theranos investors own preferred shares, which means they get paid back before Holmes, who owns common stock. According to VC Experts, investors in Theranos own a particular kind of preferred equity, called participating preferred shares, which take precedence to common stock in the event of a liquidation. FORBES is not aware of any plans to liquidate. If that were to happen, participating preferred investors would get their money back and more before Holmes gets a cent.

We now know the difference between a typical Silicon Valley company and one that actually has to produce a real physical product:  The emperor's new clothes are revealed far sooner for the companies who make actuall "stuff".

It appears that the medical testing industry does not lend itself to the "long con."

I So Hope that the Banksters Lose This One

Puerto Rico is in debt, and, as befitting their colonial status, they have very few options to renegotiate their debt. This is a fact of life for colonial societies: Debt peonage to your imperial masters.

That being said, and audit of Puerto Rico's debt seems to indicate that many of the debts were issued illegally, and so the contracts under which the debt was issued, and hence the debt itself, may be unenforceable:

An audit report published on Thursday suggests that debt-laden Puerto Rico may be able to void some of its borrowing because politicians exceeded constitutional debt limits and their own authority. 

 The report, shared with MarketWatch, states that some of Puerto Rico’s debt may have been issued illegally, allowing the government to potentially declare the bonds invalid and courts to then decide that creditors’ claims are unenforceable. The scope of the audit report, issued by the island’s Public Credit Comprehensive Audit Commission, covers the two most recent full-faith-and-credit debt issues of the commonwealth: Puerto Rico’s 2014 $3.5 billion general-obligation bond offering and a $900 million issuance in 2015 of Tax Refund Anticipation Notes to a syndicate of banks led by J.P Morgan.

Money for those debt payments is not in the commonwealth’s proposed budget, either. On Tuesday Puerto Rico’s governor, Alejandro García Padilla, sent a proposed 2016-17 budget to the island’s legislature that provides for only $209 million of the $ 1.4 billion of current debt-service cost. As García Padilla told reporters at a news conference: “This is simple: either we pay Wall Street or we pay Puerto Ricans. If the legislature decides we pay Wall Street more, well, each has his responsibility. I will continue defending Puerto Ricans. Money I send to Wall Street, I do not have to provide services here.”  

………

The Puerto Rican constitution contains a balanced-budget clause that explicitly prohibits borrowing to finance operating deficits, but its politicians borrowed to cover deficit financing in its 2014 General Obligation Bond Offering, according to the commission’s initial review. The March 2014 General Obligation Bond states that the proceeds would be used in part to cover deficits that had accumulated and that were expected to occur in the year of the offering. The documents include a chart showing deficits financed with borrowing during the past and that were expected to recur.

In addition, Puerto Rico did not inform bondholders that its constitution forbids it from using debt to finance deficits. That, the commission’s report says suggests “substantive” noncompliance with the letter of the constitution.

The U.S. Supreme Court has said in the Litchfield v. Ballou case and, more recently, in litigation related to Detroit’s bankruptcy that borrowing above a debt ceiling may allow the issuer to declare debt invalid and, therefore, unpayable. Detroit went to court to invalidate $1.45 billion in certificates of participation, debt issued by two shell companies called “service corporations.” The parties settled before the case went to trial, but, while refusing two initial proposed settlements, the judge stated that Detroit’s argument had “substantial merit” and that the suit would have had a “reasonable likelihood of success.”

I really hope that the people of Puerto Rico win, and the bond holders lose.

This is Our Dystopian Future

Couldn't adjust my air conditioning today because my thermostat was offline. The future is amazing! pic.twitter.com/hlMgaImAiz

— Adam Driscoll (@adamdriscoll) May 31, 2016

People in tech talk about the "Internet of Things" all the time.

They think it will make our lives a paradise.

I think that it will mean that the technology will be less reliabl.

I am also not particularly keen on my regrigerator spying on me when I raid it at 1 in he morning. 

I want to be alone with my fruit stuffed pasties, thank you very much.

H/t naked capitalism.

Well, This is a Fine F%$# You

The German Parliament just voted to recognize the Armenian Genocide, and Turkish President Erdogan's head is exploding:

The German Parliament overwhelmingly adopted a symbolic but fraught resolution on Thursday declaring the killings of Armenians by Ottoman Turks in 1915 a genocide, escalating tensions with Turkey at a diplomatically delicate juncture.

The Turkish government angrily denounced the vote as “null and void,” and President Recep Tayyip Erdogan called his ambassador in Germany back to Ankara for consultations.

“The way to close the dark pages of your own history is not by defaming the histories of other countries with irresponsible and baseless decisions,” Turkey’s foreign minister, Mevlut Cavusoglu, wrote on Twitter. In Ankara, Prime Minister Binali Yildirim said, “There is no shameful incident in our past that would make us bow our heads.”

Germany needs Turkey’s help in following through on a deal with the European Union to manage the refugee crisis attributed in large part to the Syrian civil war. At the same time, the German chancellor, Angela Merkel, has been under pressure not to be seen as caving to pressure from Ankara to compromise on Western values, particularly after a recent dust-up over freedom of speech set off by a German comedian’s satire that outraged Mr. Erdogan.

………

Ms. Merkel’s Christian Democratic Union and its coalition partners supported the resolution, which was originally proposed for last year, to mark the centennial of the start of the killings. But it was repeatedly delayed, most recently in February, over concerns about angering Ankara.

As the vote approached, debate intensified in Germany, which is home to an estimated three million people of Turkish descent, many of whom have dual citizenship. About 2,000 Turks demonstrated last weekend in Berlin, rallying to say that Parliament is not a court and therefore should not pass judgment.

………

Her decision to do so, despite those objections, may have been influenced by an episode in March, when a German comic, Jan Böhmermann, lampooned Mr. Erdogan with a crude poem. Ms. Merkel initially criticized the verses, giving the impression — which she later said was a mistake — that she advocated restrictions on freedom of expression in Germany. Critics portrayed her as weak.

Cem Ozdemir, the co-chairman of the opposition Greens and a driving force behind the resolution, accused Ms. Merkel of paying little heed to Turkey for most of her decade in power, until circumstances forced her to engage with Mr. Erdogan.

On Thursday, Mr. Ozdemir said there was “never a favorable time to speak about something as dreadful as genocide.”

Mr. Ozdemir read century-old statements by officials of the German Empire showing they knew that up to 90 percent of Armenians had been killed. “Working through the Shoah is the basis of democracy in Germany,” Mr. Ozdemir said, referring to the Holocaust. “This genocide is also waiting to be worked through.”

There have been people fighting for this for decades.

Merkel is not one of these people. She felt a political need to push this through because she is seen as kowtowing to an increasingly megalomaniacal and despotic Turkish leader.

Still, this is a positive move, and hopefully we will see more of this.

The Clintons Really Do Hate the Working Man

Yesterday in Cranford, NJ, Bill Clinton discussing Donald Trump's surprising political success noted that "Non-college-educated Americans need to be brought along to the future."

I shouldn't be surpriaed.  After 40 years in politics, demonizing the poor, diminishing labor unions, embracing the powerful, helping send decent middle class jobs to Mexico and China, I guess the fact that they hold the ordinary working American in disdain should have been obvious.

The Clintons think that people who work on their feet, "need to be brought into the future."

They are avatars of the professional class in the Democratic Party, and smug condescension drips from them.

The Secret Allure of the Sharing Economy

You can form a big company and create pseudo free agents who are free to be bigots:

This is a story of an Airbnb experience I recently went through. I met this awesome lady Crissie in my Facebook group. Super nice lady, successful business owner, beautiful family, and they live in a small town in Idaho.

Crissie would post these amazing videos of the land and the snow, and the mountains and trees, and I told her one day I would come visit.

It‘s so absolutely beautiful there!

………

I like my space when I travel, and thought it would be fun to find a cool cabin.

………

Everything was set! As usual, I included a bit of info about myself on the Airbnb listing to put the host at ease

………

First response: Dang! No luck, even though the dates were available all of a sudden, the host said she was going to use the place.

………

No biggie, I’m really flexible. Crissie told me late June is good as well, so I rebooked for June.

CANCELLED! Well damn. So it wasn’t really the dates—the host cancelled my new request and ignored all future messages.

So I had a white friend book for my same dates, and all of a sudden her plans changed back. Approved immediately!

There are some similar stories and links described at the article.

I rather expect to find the same thing in all the similar apps.

My guess is that a black man finds getting an Uber or Lyft just as hard as finding an old fashioned taxi.

In fact, it might be harder, because there is no taxi commission collecting data on fares and origination and destination points.

That's why this sh%$ needs real regulation with teeth.

I'm Afraid to Click Through on the Link

Over at Alicub blog, I came across the phrase "This may be the worst thing McArdle has ever written.

Megan "Math is Hard" McArdle might very well be the stupidest f%$#ing person on the internet, and her writing makes my head hurt on the best of days.

If I read This article, might have unfortunate results.